CNS Therapeutics doesn't fit the classic profile of a successful life sciences start-up.
CNS invented no new device or drug. No new life-saving therapy. The patient may not even be aware that the CNS product, used to treat severe spasticity in folks with cerebral palsy and other conditions, has been used.
What CNS created was a new package for a medication that has been used for years. And the payoff? The St. Paul company was recently acquired for about $100 million, only five years after its formation.
But attributing the success of CNS to a clever package dramatically undersells the achievement of the company. It's mostly a great case of a management team, led by co-founder John Foster, listening to the customer.
CNS saw a problem that, if solved, could make refilling an implantable drug pump a lot easier.
The competing drug product is made by Novartis and is sold by Medtronic for use in Medtronic pumps, and it was fine except for how it was packaged. It's shipped in a small glass jar with a top shaped a bit like those tiny plastic electric candles you see around the holidays, and to get out the drug you have to break off the top of the candle.
Medtronic provides a refill kit that includes a filter for the medical staff to filter out any bits of busted glass.
"We kept asking Medtronic if they had any influence with Novartis," said Robert Nordin, pharmacy manager with Gillette Children's Specialty Healthcare in St. Paul. "Come to the marketplace with a vial. Be creative, and have it come in pre-filled syringes. Make it so it would be easier to use and not just for a high-volume site like Gillette, but for the smaller clinics that ... are outstate."
CNS got its start in 2007. In 2010 its refill product, a generic version of the drug baclofen, was cleared for sale. CNS called its drug Gablofen and ships it in ready-to-use vials so there's no need to break any glass. Said Nordin: "They came with exactly what we wanted to have."
Innovation, it seems, isn't always about leading-edge discovery. It can be about solving simple problems, an approach that appealed to venture capitalists, too.
Pete McNerney of Thomas, McNerney & Partners, said that before he met CNS his firm had been nosing around for investment ideas in the market for targeted drug therapy into a patient's spinal fluid.
He called the patients served by that kind of drug pump "challenging," many of them very ill for a long time, and who likely began using an implantable pump only after simpler therapies had already failed.
So when he met the CNS Therapeutics founders, pitching a business plan based upon focus on the customer, convenience and ease of use, he understood their opportunity. The drug pumps are made by device makers, and the drug makers had poorly served the market.
A case in point is Medtronic having to get its baclofen drug from Novartis.
Gillette's Nordin noted that while Gablofen was "slightly cheaper" than the Medtronic product "price wasn't even a consideration. Patient safety was paramount."
CNS' strategy was not just better packaging, as it followed up by launching a baclofen product in a new concentration, allowing for some patients to stretch the time between pump refills. CNS called its product the first new concentration in the market since baclofen injections were introduced in 1992.
CNS was acquired this month by Mallinckrodt, the pharmaceuticals business of Covidien, the large, Irish health care products company. CNS co-founder and CEO John Foster was not available for a conversation, as his new employer preferred him answering questions in e-mail.
He noted that while CNS' first product competed directly in the U.S. with Medtronic's, his company and Medtronic work together closely to advance the whole field of therapy. A Medtronic spokeswoman confirmed that it welcomes the addition of providers of products for its pumps.
Foster wrote that CNS was far from a single product line company, and that it currently has "several line extensions and three additional products" in development or in the regulatory process with the Food and Drug Administration.
As Foster explained, the opportunity to sell CNS came earlier than planned, but the company declined to comment on invested capital or returns. Based on public filings, a sensible conclusion would be about $18 million in total equity raised. As the sale price was announced as "approximately $100 million," CNS was a clear winner.
McNerney said the CNS investment worked because of good execution, less so because the founders had a big idea.
As McNerney drily observed, "as you may know, a focus on the customers, especially customers dealing with a very difficult population, is generally a good thing."
Lee Schafer • 612-673-4302 email@example.com